2018 half year results

Transcription

1 2018 half year results 1 August 2018 London

2 Cautionary statements 2 This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited ( Rio Tinto ). By accessing/attending this presentation you acknowledge that you have read and understood the following statement. Forward-looking statements This document, including but not limited to all forward looking figures, contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Rio Tinto Group. These statements are forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, and Section 21E of the US Securities Exchange Act of The words intend, aim, project, anticipate, estimate, plan, believes, expects, may, should, will, target, set to or similar expressions, commonly identify such forward-looking statements. Examples of forward-looking statements include those regarding estimated ore reserves, anticipated production or construction dates, costs, outputs and productive lives of assets or similar factors. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors set forth in this presentation. For example, future ore reserves will be based in part on market prices that may vary significantly from current levels. These may materially affect the timing and feasibility of particular developments. Other factors include the ability to produce and transport products profitably, demand for our products, changes to the assumptions regarding the recoverable value of our tangible and intangible assets, the effect of foreign currency exchange rates on market prices and operating costs, and activities by governmental authorities, such as changes in taxation or regulation, and political uncertainty. In light of these risks, uncertainties and assumptions, actual results could be materially different from projected future results expressed or implied by these forward-looking statements which speak only as to the date of this presentation. Except as required by applicable regulations or by law, the Rio Tinto Group does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events. The Group cannot guarantee that its forward-looking statements will not differ materially from actual results. In this presentation all figures are US dollars unless stated otherwise. Disclaimer Neither this presentation, nor the question and answer session, nor any part thereof, may be recorded, transcribed, distributed, published or reproduced in any form, except as permitted by Rio Tinto. By accessing/ attending this presentation, you agree with the foregoing and, upon request, you will promptly return any records or transcripts at the presentation without retaining any copies. This presentation contains a number of non-ifrs financial measures. Rio Tinto management considers these to be key financial performance indicators of the business and they are defined and/or reconciled in Rio Tinto s annual results press release and/or Annual report. Reference to consensus figures are not based on Rio Tinto s own opinions, estimates or forecasts and are compiled and published without comment from, or endorsement or verification by, Rio Tinto. The consensus figures do not necessarily reflect guidance provided from time to time by Rio Tinto where given in relation to equivalent metrics, which to the extent available can be found on the Rio Tinto website. By referencing consensus figures, Rio Tinto does not imply that it endorses, confirms or expresses a view on the consensus figures. The consensus figures are provided for informational purposes only and are not intended to, nor do they, constitute investment advice or any solicitation to buy, hold or sell securities or other financial instruments. No warranty or representation, either express or implied, is made by Rio Tinto or its affiliates, or their respective directors, officers and employees, in relation to the accuracy, completeness or achievability of the consensus figures and, to the fullest extent permitted by law, no responsibility or liability is accepted by any of those persons in respect of those matters. Rio Tinto assumes no obligation to update, revise or supplement the consensus figures to reflect circumstances existing after the date hereof.

3 J-S Jacques Chief executive

4 Our strategy is delivering 4 Total cash returns to shareholders of $7.2 billion, comprising: - Interim returns of $3.2 billion (including dividend of $2.2 billion, 127 US cents per share) - Disposal proceeds of $4.0 billion EBITDA of $9.2 billion, margin of 43% Reshaping the portfolio with divestments announced in H of $5 billion Invested $1.4 billion in high-return growth - AutoHaul TM delivering, Oyu Tolgoi underground and Amrun on track Delivered $0.3 billion free cash flow from productivity in H1 2018

5 Strong results delivered in H Robust financial performance Disciplined capital allocation Positioning for the long-term EBITDA of $9.2 billion Interim 2018 dividend of $2.2 billion AutoHaul TM delivering flexibility and increased capacity in the Pilbara Operating cash flow of $5.2 billion Additional share buy-back declared of $1.0 billion Oyu Tolgoi underground development on track Free cash flow of $2.9 billion Return of disposal proceeds of $4.0 billion Amrun development progressing to plan $0.3 billion of mine-to-market productivity improvements delivered Capital expenditure of $2.4 billion Divestments announced of $5 billion in H1 2018

6 All injury frequency rate per 200,000 hours Safety and health come first 6 Continuing history of improvement in AIFR 2.78 Rio Tinto ICMM (23 companies) Fatality at Rio Tinto Fer et Titane in April 2018 Fatal assault on a security contractor at Richards Bay Minerals in July 2018 Eliminating fatalities through the Critical Risk Management programme which continues to be embedded, including controls for critical health risks Jul 2018 YTD Preventing catastrophic events through our focus on process safety and the identification and management of controls for major hazards Reducing injuries through targeted hazard elimination campaigns Ongoing focus on mental health, wellbeing and fatigue management

7 Strong cash flow from world-class assets 7 Iron Ore Aluminium Copper & Diamonds Energy & Minerals Margins 67% Pilbara operations FOB EBITDA margin 35% Integrated operations EBITDA margin 45% EBITDA margin 36% EBITDA margin Cash flow Cash flows from operations: Development capex: $4,245m $183m Cash flows from operations: Development capex: $1,137m $449m Cash flows from operations: Development capex: $838m $690m Cash flows from operations: Development capex: $599m $31m Free cash flow: $3,759m Free cash flow: $327m Free cash flow: $28m Free cash flow: $379m

8 Asset quality Cost curve position, scale and expandability Further strengthening our world-class portfolio 8 c.$8bn of disposals announced since 2017 Core portfolio Successful divestment programme. Since 2017: Exiting thermal coal and coking coal assets Exiting European smelters Thermal coal Met coal European smelters Continuous portfolio review focusing on higher long-term returns Grasberg non-binding HoA signed for intended $3.5 billion sale Long-term commodity fundamentals Evaluation of acquisition opportunities Rigorous and disciplined Creates additional scope and capability Size of the bubbles represent reported operating assets value for core portfolio and disposals proceeds for disposed assets

9 Chris Lynch Chief financial officer

10 Robust pricing across most commodities 10 Iron Ore $/dmt 62%, FOB WA $/dmt 58%, FOB WA ~40% Copper 375 c/lb Aluminium 3,250 $/t LME + MW Premium 3,000 2,750 2,500 2,250 2,000 1,750 1, Bauxite 60 $/t CFR China Iron ore prices underpinned by record steel production in China. Steel and iron ore inventories drawing down Aluminium prices moved higher by US import duties and sanctions Copper price impacted in June by concerns over trade restrictions Bauxite price supported by demand from growing Chinese coastal refinery capacity Sources: Bloomberg, Metal Bulletin, Platts

11 EBITDA driven by higher pricing and increased volumes, offsetting cost headwinds 11 Underlying EBITDA H vs H $ billion (0.3) (0.1) (0.2) (0.2) (0.1) (0.4) H underlying EBITDA Price Exchange rates Energy CPI Flexed H underlying EBITDA Volumes & mix Raw material cost headwinds Other cash costs* One-offs and other H underlying EBITDA * Cash costs include movements in Exploration & Evaluation costs

12 Inflation is challenging the industry 12 Australian & US headline CPI increasing % 4.0 US Federal Funds Rate US CPI Australian CPI Jan-16 Jan-17 Jan-18 Oil (Brent) price increasing $/bbl Jan-16 Jan-17 Jan-18 Return of inflation in the US driving an increase in the federal funds rate Higher input energy prices impacted EBITDA by $0.2 billion in H Raw materials cost headwinds impacted EBITDA by $0.3 billion in H Aluminium raw materials Index Caustic soda Petroleum coke Coal tar pitch 80 Jan-16 Jan-17 Jan-18 Source: CEIC, Rio Tinto, FactSet

13 Productivity programme on track despite cost headwinds 13 Post-tax mine-to-market (M2M) productivity programme $ billion (free cash flow) (0.2) $0.3 billion mine-to-market free cash flow (net of cost headwinds) delivered in H Cost headwinds from Aluminium and Energy & Minerals raw materials (caustic, pitch, coke and electrodes) Additional $0.4 billion M2M free cash flow expected in H delivered H delivered H cost headwinds * Based on consensus prices and exchange rates 2017 & H cumulative total 2017 & 2018 full year cumulative target*

14 Strategic disposals announced since $7.7 billion disposals announced since 2017 $ billion Value delivered through divestments 2017: Coal & Allied: $2.7 billion : Coking coal: $4.15 billion Kestrel and Hail Creek sales completed on 1 August 2018 Winchester South sale completed on 1 June H Total since : European aluminium smelters: $0.8 billion ISAL and Dunkerque sales expected to complete in Q In addition, non-binding HoA signed on 12 July 2018 for intended sale of Grasberg interest for $3.5 billion

15 Disciplined capital allocation 15 $8.5 billion paid to shareholders over the last 12 months* ($ billion) 1 2 Essential sustaining capex Ordinary dividends Further cash returns to shareholders Compelling growth 8.5 Cash returned to shareholders 2.3 Sustaining capital Growth capital Iterative cycle of Debt management Balance sheet 2.4 * Refer to slide 40 for detailed breakdown

16 Sustaining capital and compelling growth 16 Capital expenditure profile $ billion ~5.5 ~6.0 ~6.5 Maintained sustaining capital guidance of $2.0 to $2.5 billion per year, including: Iron Ore sustaining capex of ~$1 billion per year Pilbara replacement capital of ~$2.7 billion includes Koodaideri development from F 2019F 2020F Sustaining Pilbara replacement Other replacement Development Other replacement capital includes: South wall pushback at Kennecott Amrun replacement tonnes Zulti South Development capital includes: Oyu Tolgoi, including development of power station Amrun AutoHaul TM

17 Strong balance sheet 17 Net debt $ billion Net debt of $5.2 billion Cash outflows in H1 2018: $1.2 billion final Australian tax payment pertaining to 2017 profits $4.7 billion in returns to shareholders $2.4 billion in capital expenditure Gross debt reduced by $2.1 billion in H Net interest paid of $0.1 billion associated with bond purchase programme New leasing accounting standard to come into effect from January 2019** Jun-17 Adjusted Dec-17* Jun-18 * Adjusted for $1.2 billion tax payment in H pertaining to 2017 profits ** Undiscounted operating lease commitments disclosed in note 31 of the Rio Tinto 2017 Annual Report were $1.8 billion

18 18 Delivering superior returns for shareholders 2018 cash returns to shareholders* $ billion Interim 2018 returns to shareholders of $3.2 billion announced Interim dividend of $2.2 billion or 127 US cents per share to be paid in September 2018 Paid 1.4 Additional share buy-back of $1.0 billion in Rio Tinto plc shares by the end of February 2019 Paid % of underlying earnings 3.2 In addition to $1.4 billion remaining from completion of $2.9 billion buy-back in Rio Tinto plc shares by the end of final dividend SBB paid in H Existing SBB remaining in H interim dividend Additional SBB by Feb cash returns * Additional share buy-back (SBB) announced on 1 August 2018 of $1 billion to be completed in February 2019

19 Announced divestment proceeds will be returned to shareholders 19 Additional disposal proceeds $ billion Completed 2.3 Kestrel Completed Completed Hail Creek & Valeria Winchester South* 4.2 Disposals completed (~1.0) Estimated tax payable ~4.0 Dunkerque ISAL 2018 posttax disposal proceeds Disposals of $4.15 billion (pre-tax) completed for coking coal assets: Estimated total tax payable in the order of $1 billion Dunkerque and ISAL sales expected to complete in Q for $0.8 billion Rio Tinto board has approved that post-tax proceeds of $4.0 billion will be returned to shareholders Precise timing and form to be determined * $50 million from the sale of Winchester South to be received on 1 June 2019 (12 months from the date of completion)

20 J-S Jacques Chief executive

21 Growth (MoM,%) PMI Index YoY ytd % real Global macro indicators remain supportive 21 Global PMIs have eased but remain in expansion US Eurozone China Japan 40 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Chinese growth slowing very gradually Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 GDP Construction GDP Manufacturing GDP Services GDP Global trade remains strong Global Trade Volume Container Traffic Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Controlled deceleration in Chinese economic growth since Q Recent rebound in world trade volumes and container traffic reassures that global trade growth remained healthy in H Manufacturing sentiment has weakened but remains comfortably in expansion territory despite rising trade tensions Trade tensions unlikely to materially affect steel demand Source: CEIC, Rio Tinto, Bloomberg

22 China supply-side reform and tightening environmental policy have driven structural change 22 Supply side reform Policies focused on restoring profitability and reducing debt Unprecedented steel and aluminium capacity reductions Limiting future capacity growth Environmental policies Environmental protection marked as a top three domestic policy priority Additional ultra-low emissions standards to apply to industry by 2025 Driving structural change Improved productivity and profitability of Chinese steel industry Strong demand for high quality, driving structural iron ore premiums Improved fundamentals for global aluminium industry

23 Challenging global environment demands a resilient business 23 A portfolio of world-class assets EBITDA margin of 43% Operating cash flow of $5.2 billion Investing in Tier 1 growth Maintaining a strong balance sheet Net debt of $5.2 billion Continued focus on cash $5 billion mine-to-market productivity programme Active portfolio management

24 High-return growth optionality 24 Iron Ore Aluminium Copper Industrial Minerals Optimising the world s premier iron ore business Building optionality into the lowest cost bauxite and aluminium business Building the largest and highest quality copper development Extensive exploration programme and high-return niche growth Increasing flexibility of Pilbara system $1.9 billion Amrun bauxite project to be commissioned in H $5.3 billion Oyu Tolgoi underground first drawbell production in 2020 Zulti South mineral sands project in feasibility study Koodaideri project in feasibility study Further bauxite expansion options in northern Australia $0.9 billion Kennecott South Wall Pushback Jadar lithium/borates in pre-feasibility study high-growth option in battery minerals Pursuing additional productivity and automation initiatives Significant resource optionality to maintain high-quality product Brownfield Canadian aluminium expansion optionality First full year of increased Escondida capacity in 2018 Resolution copper pre-feasibility study to be completed by 2021 H E&E spend of $232 million in 17 countries across 8 commodities

25 Our strategy will deliver value through the cycle 25 Superior cash generation World-class assets Portfolio Operating excellence Performance Capabilities People & Partners Disciplined capital allocation Balance sheet strength Superior shareholder returns Compelling growth

26 Our strategy is delivering 26 Total cash returns to shareholders of $7.2 billion, comprising: - Interim returns of $3.2 billion (including dividend of $2.2 billion, 127 US cents per share) - Disposal proceeds of $4.0 billion EBITDA of $9.2 billion, margin of 43% Reshaping the portfolio with divestments announced in H of $5 billion Invested $1.4 billion in high-return growth - AutoHaul TM delivering, Oyu Tolgoi underground and Amrun on track Delivered $0.3 billion free cash flow from productivity in H1 2018

27 Appendix

28 Strong aluminium and copper prices partially offset by lower iron ore prices 28 EBITDA H vs H $ million 10,000 9, Aluminium* Copper Minerals Uranium Coal Diamonds Iron ore Other, net 8, , ,000 2, (550) 0 H underlying EBITDA Price * Aluminium includes alumina and bauxite and includes movements in market and other premia

29 Strong sales in iron ore, copper and aluminium 29 EBITDA H vs H $ million 12, ,000 8,000 9, (131) (161) (145) 9, ,000 (6) (13) (19) 4,000 2,000 0 H underlying EBITDA Price Exchange rates Energy Inflation Flexed H underlying EBITDA Volumes & Mix * Aluminium includes alumina and bauxite

30 Iron Ore: our low-cost advantage has been sustained over many years 30 Pilbara cash unit cost $ per tonne H cash unit cost of $13.4/t (3% lower than H1 2017) Focus remains on maintaining consistently attractive FOB EBITDA margins (67% in H1 2018) ~10% increase in haul distance for 2018; strip ratio flat Cyclic maintenance costs being partly offset by new tactics >4,500 productivity improvement initiatives Average realised FOB price of $57.9 per wet metric tonne ($63.0/dry metric tonne) 2018 shipments from the Pilbara are expected to be at the upper end of the existing guidance range ( Mt), subject to market conditions and any weather constraints H H H H H1 2018

31 Iron Ore: increased sales and cost savings partly offset by lower prices 31 Underlying EBITDA H vs H $ million 6,000 5,607 4, ,656 4,000 (542) (27) (41) (34) 2,000 0 H underlying EBITDA Price Exchange rates Energy Inflation Flexed H underlying EBITDA Volumes & Mix Cash costs Other H underlying EBITDA Pilbara shipments of million tonnes (100% basis) were 9% higher than in H1 2017, reflecting ongoing productivity improvements being made to the rail network, along with increased flexibility across the infrastructure system Pilbara FOB EBITDA margin of 67% achieved in H (69% in H1 2017) Pilbara cash unit costs of $13.4 per tonne in H1 2018, compared with $13.8 per tonne in H Pilbara iron ore revenues includes $767 million of freight in H compared to $569 million in H1 2017, following increases in freight rates period-on-period Approximately 66 per cent of sales in 2017 were priced with reference to the current month average, 17 per cent with reference to the prior quarter s average index lagged by one month, five per cent with reference to the current quarter average and 12 per cent were sold on fixed terms on the spot market Approximately 31 per cent of sales in the quarter were made free on board (FOB), with the remainder sold including freight

32 Aluminium: higher prices and volumes & mix partly offset by increasing raw material cost headwinds 32 Underlying EBITDA H vs H $ million 2,500 2,000 1,500 1, ,074 (45) (57) (47) (255) (156) 1,831 1, H underlying EBITDA Price Exchange rates Energy Inflation Flexed H underlying EBITDA The H cash LME aluminium price averaged $2,209 per tonne, an increase of 18 per cent on H The average realised price per tonne averaged $2,547 in H (H1 2017: $2,151) due to higher market and product premia. This includes premia for value-added products (VAP), which represented 58% of primary metal sold in H (H1 2017: 57%) and generated attractive product premia averaging $222 per tonne of VAP sold (H1 2017: $217 per tonne) on top of the physical market premiums Raw material cost headwinds of $229 million have been experienced by the Aluminium business in H1 2018, primarily associated with caustic soda, tar pitch and petroleum coke Integrated operations EBITDA margins were 35% in H1 2018, consistent with H Bauxite revenues includes $178 million of freight in H ($111 million in H1 2017) Binding offers for the sale of the Aluminium Dunkerque smelter in France for $500 million and the ISAL aluminium smelter in Iceland for $345 million were announced in H and are expected to complete in Q3 2018, subject to satisfactory completion of consultations with key stakeholders and applicable regulatory clearances Volumes & Mix Cash costs Other H underlying EBITDA

33 Copper & Diamonds: higher prices and volumes driving increased EBITDA 33 Underlying EBITDA H vs H $ million 1,500 1,250 1, (11) (14) (21) 1, (48) (30) , H underlying EBITDA Price Exchange rates Energy Inflation Flexed H underlying EBITDA Volumes & Mix Cash costs Exploration & evaluation H oneoffs Other H underlying EBITDA Copper & Diamonds underlying EBITDA of $1,360 million benefitted from stronger copper production and higher prices in H Copper & Diamonds generated net cash from operating activities of $0.8 billion in H and invested around $0.7 billion in development capital Absence of Escondida strike in H resulted in a favourable one-off impact, partly offset by the non-recurrence of the Manefay slide insurance settlement To maximise use of available smelter capacity, Kennecott purchased and tolled 83.1 thousand tonnes of third party concentrate in H At 30 June 2018, the Group had an estimated 264 million pounds of copper sales that were provisionally priced at 312 cents per pound. The final price of these sales will be determined during the second half of This compares with 250 million pounds of open shipments at 31 December 2017, provisionally priced at 304 cents per pound

34 Energy & Minerals: higher prices offset by one-offs and the divestment of Coal & Allied 34 Underlying EBITDA H vs H $ million 1,750 1,500 1,250 1, ,434 H underlying EBITDA 203 Price (50) (3) (44) Exchange rates 1,540 Energy Inflation Flexed H underlying EBITDA (333) (9) Coal & Allied (divested H2 2017) (108) (236) (64) Volumes Cash costs IOC strike RTIT oneoffs 195 Winchester South (divested H1 2018) 52 1,037 Other H underlying EBITDA Underlying EBITDA of $1,037 million was six per cent lower than H after excluding the contribution from Coal & Allied in the 2017 first half, impacted by the suspension of operations at IOC while collective bargaining negotiations took place, at RTFT following a fatality, and due to labour disruptions at RBM. This was partly offset by higher prices and the gain recognised on the sale of Winchester South that completed in the first half Energy & Minerals delivered operating cash flows of $599 million, resulting in a free cash flow contribution to the Group of $379 million Rio Tinto completed the sale of its 75 per cent interest in the Winchester South coal development project in Queensland, Australia, to Whitehaven Coal Limited in H $150 million cash was received on completion and an unconditional cash payment of $50 million is due in 12 months from the date of completion The sale of Rio Tinto s interests in the Kestrel and Hail Creek coal mines and Valeria coal development project completed on 1 August 2018, with pre-tax proceeds of $3.95 billion

35 Other movements in EBITDA 35 Underlying EBITDA impact $ million H FX/ price Energy & Inflation Volumes Cash Costs Epl'n eval'n Non Cash One-offs & other H Other operations - 99 (45) 6 (47) - (59) 19 (27) Exploration & Evaluation (net) (85) (15) - - (100) Other (351) (2) - - (66) 3 (17) (126) (559) Total (436) 97 (45) 6 (113) (12) (76) (107) (686) Other operations includes the Gove alumina refinery (curtailed in May 2014), Rio Tinto Marine and Legacy projects. The increase in net loss reflects higher spend at both Gove and Legacy projects Exploration & evaluation costs were higher due to increased activity levels Central office costs, central Growth & Innovation costs and other central items are reported in Other items. The $208 million (pre-tax) increase in Other items includes restructuring, project and other one-off costs of $68 million (pre-tax) in 2018 first half. It also reflects an increase in Information System & Technology spend of $49 million (pre-tax) and further investment in capability to support the Group s mine-to-market productivity programme

36 Near-term maturities further reduced in 2018 $(m) 3,000 2,000 1, December 2017 debt maturity profile* Gross debt reduced by $2.1 billion in H of which $1.9 billion nominal value of bonds was purchased with cash 36 0 Average outstanding debt maturity at ~11 years $(m) 3,000 2,000 Gross debt 2018 debt reductions 30 June 2018 debt maturity profile* Net interest paid of $0.1 billion associated with bond purchase programme No bond maturities until ,000 0 * Numbers based on period-end accounting value Gross Debt

37 Rigorous measurement of productivity gains 37 Accounting basis Price Commercial excellence Volumes Costs Grades Capital savings Guidance Assets Free cash flow basis, Rio Tinto share, post-tax Actual price achieved each year not a constant or rebased price Variation of product mix included Tonnes from growth capex excluded Adjustments for energy, inflation and exchange impacts All other changes in input costs are included No adjustment or rebasing for grade Capital savings are excluded Consensus pricing used Assets scheduled for closure in the next 5 years are excluded Target may be rebased should any assets be divested in the 5 year period

38 Modelling EBITDA 38 EBITDA sensitivity H average price/ rate ($m) impact on FY 2018 underlying EBITDA of 10% price/rate change Copper 315c/lb 456 Aluminium $2,209/t 849 Gold $1,318/oz 49 Iron ore (62% Fe FOB) $62/dmt 1,496 A$ 77USc 636 C$ 78USc 151 Oil $68/bbl 62 Note: The sensitivities give the estimated effect on underlying EBITDA assuming that each individual price or exchange rate moved in isolation. The relationship between currencies and commodity prices is a complex one and movements in exchange rates can affect movements in commodity prices and vice versa. The exchange rate sensitivities include the effect on operating costs but exclude the effect of revaluation of foreign currency working capital.

39 Net earnings 39 US$m H underlying earnings 4,416 Impairments (98) Net gains on consolidation and disposal of interests in businesses Exchange gains/losses on debt and derivatives Adjustments to tax charge relating to expected divestments H net earnings 4, (472)

40 Uses of cash over past 12 months 40 Uses of cash ($ billion) H H Total Sustaining capex Growth capex Balance sheet 3.8 (1.4) 2.4 Shareholder returns Interim dividend FY dividend Share buy-backs

41 Application of the returns policy 41 Capital return considerations Results for 2018 H1 Long term growth prospects Balance sheet strength Strong earnings / cash generation supplement with additional returns per cent of underlying earnings through the cycle Balanced between growth and shareholder returns Outlook Comments Underlying EBITDA up 2% to $9.2 billion Operating cash flow of $5.2 billion Commissioned Silvergrass, focused on Amrun and Oyu Tolgoi Ongoing exploration and evaluation programme. Rio Tinto Ventures established Strong balance sheet with net debt of $5.2 billion Payout of >60% threshold possible because of strong performance One-off asset disposal proceeds of $5 billion expected in H Payout >60% threshold possible based on (i) strong H prices (ii) $5 billion of announced disposals (pre-tax), and (iii) strong balance sheet Defined growth pipeline provides capacity to allocate more to shareholder cash return and debt reduction Strong global growth, strong demand for premium products Potential for continued price volatility